Apple Inc. (AAPL), Google Inc (GOOG): Does This Rumor Confirm Cannibalization?

While Google Inc (NASDAQ:GOOG) missed in its recent earnings report, Apple Inc. (NASDAQ:AAPL) did better than expected during the quarter in terms of sales. But the company reported lower margins. Why?

Part of the reason is that sales of iPhone 4 and 4S devices, which are cheaper, cut into iPhone 5 sales, and the fewer of the high-priced models were sold, the lower the margins.  With the iPhone 5S being more of an internal upgrade than an external one, the new model could in effect replace the iPhone 5 as the premium-priced model in the market. That then leaves the 4 and 4S to take up the mid- or low-range price points, and the budget iPhone would be somewhere in the middle.

Having three price points in the market without having to spend the money making two phones that are similar to each other in order to achieve that may likely help improve margins while (hopefully for Apple) not disrupting sales numbers adversely.

What do you think? Should Apple Inc. (NASDAQ:AAPL) adopt this approach for its business model? And if this becomes reality, do you think this tactic will work for Apple in the long run? If you are an investor like fund manager David Tepper (see his full equity portfolio), would you approve this approach for sales and margin considerations? Let us know your thoughts in the comments section below.

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